BNP Buys French Gov’t. Share of Credit Lyonnais for $2.2 Billion

November 25, 2002

France’s second largest bank, BNP Paribas, emerged as the winner of a surprise auction by the French government for its 10.9 percent share in Credit Lyonnais (CL), France’s fifth largest bank.

Following a restructuring in 1999, the government imposed a temporary pact with CL’s other major shareholders to resist hostile takeovers. The agreement, which is due to expire next July, was meant to give them time to work out the eventual ownership structure of CL among themselves, but as negotiations have dragged on the new center-right government has become increasingly frustrated at their inability to reach an agreement.

The largest shareholder – after the government – is France’s biggest bank, Credit Agricole, which, as its name implies, has a large proportion of its operations in rural parts of the country. It has been seen as the leading contender to take over CL. Two insurers also own portions of the bank, Germany’s Allianz, through its French subsidiary AGF holds a 10.001 percent stake, and France’s AXA controls 5.3 percent. 48.6 percent of CL is publicly owned.

On Friday the government suddenly announced that it would sell its shares over the weekend to the highest bidder. BNP offered 58 Euros (the Euro is currently at approximate parity with the dollar) for the 38 million shares, a hefty 49 percent premium over the recent share price, which has been between 38 and 39 Euros. The offer is valued at around $2.2 billion, $700 million more than most analysts had expected.

The acquisition by BNP is perhaps the opening round in a bidding war over CL. Both AGF and AXA have indicated that they would be interested in an offer for their shares at the right price. That price has just gotten a lot more expensive.

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